Technically Speaking

The open chart gap remains unfilled and July is now above the 100-day moving average. The 20-day moving average has now crossed over the 50-day moving average to the upside, typically a bullish indicator.

The fact that Russia is unlikely to allow a renewal of the Black Sea Grain Initiative on its July 18 expiry, along with the uncertainty looming in Russia where there was a near coup by the Wagner mercenary group, has bulled up the wheat market even more to begin the new week. Also potentially bullish is the fact that, as of last Tuesday, managed money funds were still net short 84,000 contracts and have slowly been exiting that position.

However, on a cautious note, while momentum indicators are signaling strong momentum to the upside, they are certainly in what might be considered the overbought zone, so a pullback is certainly possible. We seem to be seeing the start of such a pullback at midmorning on Monday. Chicago July must stay above the $7.00 level or risk breaking down.

July soybeans are rallying again early Monday, rising to the highest level since early March. With the carryout still at a historically low level, and with the current mostly hot and dry weather pattern over much of the soybean belt, the nearly $2.00 inverse from July to November suggests the difficulty in buying old-crop soybean supplies. The weekly Drought Monitor last Thursday showed 57% of the soy crop is now experiencing some form of drought.

As in wheat, the soybean momentum indicators are approaching the overbought zone, so a correction is very possible. There are rain chances this week, but the overall weather pattern remains mostly warm to hot and dry. Soybeans are generally regarded as a crop of August, so there is surely time to turn the crop around, but with Illinois beans at just 33% good to excellent last week, some soaking rains are needed soon. Without that, expect nearby soy futures to maintain the big premium until we see those soaking rains develop.

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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

Follow him on Twitter @mantini_r

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